MTA needs $5B for storm repairs

Thursday

Nov 29, 2012 at 2:00 AM

NEW YORK — The Metropolitan Transportation Authority will borrow roughly $5 billion over the next three years to cover the cost of repairing the damage that Superstorm Sandy did to the nation's largest transit system.

Judy Rife

NEW YORK — The Metropolitan Transportation Authority will borrow roughly $5 billion over the next three years to cover the cost of repairing the damage that Superstorm Sandy did to the nation's largest transit system.

Joseph Lhota, the MTA's chairman and CEO, said Wednesday that the estimate of what the agency will ultimately spend to restore service to pre-Sandy levels was a work in progress, pointing out that the system is still not fully operational, but that it will be "somewhere north of $5 billion."

For example, the South Ferry subway station at the tip of Manhattan was destroyed and, until an assessment of the damage is completed, the best guess for rebuilding it is $600 million — or roughly $70 million more than the cost of renovating it in 2009.

But Lhota voiced confidence that the federal government and insurance will reimburse the MTA for most of its loss, and that the expense will not be passed along to riders in the form of service reductions or fare increases beyond those planned before the storm.

"I have a lot of confidence in the federal government, and I feel comfortable that we will get a substantial amount of money from them," said Lhota.

The process of securing reimbursement, however, will play out over two to three years and, as a result, the MTA will sell $2.9 billion in bond anticipation notes next year and $1.9 billion in 2014 to fund the repairs. The notes will be repaid as reimbursement is received.

Robert Foran, the MTA's chief financial officer, said the agency could have to absorb as much as $950 million in Sandy costs and will sell 30-year bonds in 2015 toward that end. Internal loans and transfers will be used to cover the $263 million that the MTA lost to the storm in fares and tolls and allow the agency to end this fiscal year in the black.

The unexpected short- and long-term borrowing will add between $29 million and $62 million in annual debt service expense, amounts that Foran said will be raised through more belt-tightening.

The CFO offered no respite from the financial pressures that have battered the agency, saying deficits could soar into the billion-dollar range by 2016, despite aggressive efforts to cut costs, win labor concessions and raise fares and tolls every two years.

"Why is the deficit increasing?" said Foran. "Here's our problem: Non-discretionary costs are rising faster than inflation and discretionary costs."

The board is scheduled to adopt a 2013 budget of $13 billion next month, as well as an average 7.5 percent increase in fares and tolls that will take effect March 1.